Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  

| More

Maintain BUY on Sonata Software - Growth visibility improves - HDFC Securities

Posted On: 2021-05-16 06:47:30 (Time Zone: UTC)

Mr. Amit Chandra, Institutional Research Analyst, HDFC Securities and Mr. Apurva Prasad, Institutional Research Analyst, HDFC Securities

Sonata posted better-than-expected growth in the IT services business (IITS), led by strong growth in Microsoft portfolio (+10.2% QoQ) and recovery in Travel (+9.0% QoQ). Revenue from Microsoft related services (product engineering + dynamics implementation and upgrade) is now ~50% of IITS and is expected to deliver high teens growth. The Microsoft Dynamics modernisation program is a multi-year opportunity and Sonata is constantly investing in this segment. Travel has recovered but TUI will accelerate when leisure travel resumes in Europe (expected in 2Q). The IITS EBITDA margin contracted 543bps QoQ due to a wage hike, which was higher than the historical average. The company has stepped up hiring; offshore and utilisation (89%) are at peak levels, while the target margin range for IITS is ~22-24%. DPS growth was impressive (+26% YoY), driven by higher cloud adoption (~75% of DPS is cloud) and annuity revenue. Sonata's growth profile is improving, led by the Microsoft ecosystem, recovery in Travel, and traction in DPS business. We increase our EPS estimates by +3.6/3.7% for FY22/23E and multiple to 18x (earlier 16x). Our target price of INR 685 is based on 18x FY23E EPS. Maintain BUY. The stock trades at a P/E of 18.8/15.4x FY22/23E.

4QFY21 highlights: IITS revenue stood at USD 43.8mn (+6.2% QoQ CC) vs. an estimate of USD 42.4mn. Digital/IP-led/Platform revenue contributed 67/34/18% to IITS revenue and grew +12/10/7% QoQ. ISV/Travel/Retail/Distribution grew +9/9/14/12% QoQ. IITS margin stood at 22.4% (-543bps QoQ) due to wage hike (11-12%) while DPS margin stood at 4.2% (+169bps). Consolidated revenue was down 23% QoQ due to DPS (-30.7% QoQ) and EBITDA margin stood at 9.6%. Net cash stood at INR 5.3bn (~9% of MCap); RoE is at 34% and dividend yield is at ~3%.

Outlook: We expect IITS growth of +18.6/+15.0% and DPS growth of +20.2/+20.3% for FY22/23E. IITS margin will be at 23.4/23.8% and DPS margin at 3.1/3.3% for FY22/23E respectively. Revenue/EPS CAGR for FY21- 23E are expected at +17/22%.

Shares of SONATA SOFTWARE LTD. was last trading in BSE at Rs.580.95 as compared to the previous close of Rs. 586.55. The total number of shares traded during the day was 27784 in over 1272 trades.

The stock hit an intraday high of Rs. 612 and intraday low of 572.5. The net turnover during the day was Rs. 16355802.

Source: Equity Bulls

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

CESC Q4FY21 Results Review Report - Loss decline, strong CF make valuation attractive - HDFC Securities

White Goods & Durables - Analysis of pressure cooker market: TTK Prestige is key beneficiary - ICICI Securities

CESC - Good earnings in a challenging environment - ICICI Securities

Somany Ceramics - Walking the talk - ICICI Securities

DB Corp - Rise in newsprint price adds to risk - ICICI Securities

CEAT - Market share ambitions remain strong - ICICI Securities

Consumer Staples & Discretionary - Worm's world view #32: Conversations with paint dealers regarding price hikes - ICICI Securities

Oil & Gas - Oil, gas & spot LNG surge to bring gains for GAIL & OIL - ICICI Securities

Asset Management Companies - Positive trends to support earnings - ICICI Securities

Q4FY21 Result Update - Lemon Tree Hotels - ICICI Direct

Q4FY21 Company Update - Globus Spirits - ICICI Direct

Q4FY21 Result Update - DB Corp - ICICI Direct

Q4FY21 Result Update - Somany Ceramics - ICICI Direct

KEC International: Company Update - Building on diversification - HDFC Securities

LIC Housing Finance - Q4 FY21 Result Update - YES Securities

Entertainment Network Ltd - Beating on solutions business - ICICI Securities

Asahi India Glass - Operating leverage, product mix aid margins - ICICI Securities

Whirlpool of India - Market leading revenue growth - ICICI Securities

Lemon Tree Hotels - Wait for recovery gets longer - ICICI Securities

LIC Housing Finance - Stupendous growth momentum; needs to shore up provisioning and capital buffer - ICICI Securities

Quant Pick - Bank of Baroda - ICICI Direct

Company Update - Amara Raja Batteries - Investor Event Outcome - ICICI Direct

Q4FY21 Result Update - Bhel - ICICI Direct

Q4FY21 Company Update - NRB Bearings - ICICI Direct

CESC - Q4FY21 First Cut - ICICI Direct

Q4FY21 Result Update - Entertainment Network India - ICICI Direct

LIC Housing Finance Results Review Report - Balance sheet beefs up; P&L to stay soft - HDFC Securities

Jubilant FoodWorks 4QFY21 Results Review Report - Missing excitement; recovery priced in - HDFC Securities

BFSI Sector Update - MFI Consultation Paper Takeaways - Incrementally positive for NBFC-MFIs - HDFC Securities

Q4FY21 Result Update - JK Cement - ICICI Direct

Q4FY21 Result Update - Minda Industries - ICICI Direct

Stock Tales - Indo Count Industries - ICICI Direct

IPO Review - Krishna Institute of Medical Sciences Ltd - ICICI Direct

Q4FY21 Company Update - Greenply Industries - ICICI Direct

IPO Review - Dodla Dairy Ltd - ICICI Direct

Lemon Tree Hotels - Q4FY21 First Cut - ICICI Direct

Jubilant Foodworks - Q4FY21 investor call takeaways - YES Securities

Greenply Industries Ltd - Q4 FY21 Result Update - YES Securities

Whirlpool of India Ltd - Q4 FY21 Result Update - YES Securities

New India Assurance Report - CoRs disappoint yet again - HDFC Securities

Maintain BUY on Kajaria Ceramics - Performance shines through; outlook bright - HDFC Securities

Retain ADD on Deccan Cement - Volume strong; high other expense dents margin - HDFC Securities

Reiterate ADD on NHPC - Lower generation impacts earnings - HDFC Securities

Maintain BUY on JK Cement - Robust volume and utilisation - HDFC Securities

Maintain BUY on DLF - Gaining traction - HDFC Securities

Maintain BUY on Capacite Infraprojects - Marginal miss - HDFC Securities

DLF Ltd - Q4 FY21 Result Update - YES Securities

Greenply Industries Ltd - Q4FY21 first cut - YES Securities

Coal India - Coal makes a comeback - ICICI Securities

Kajaria Ceramics - Q4FY21 beat largely priced in - ICICI Securities

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020